Shimojima's (TSE:7482) Shareholders Will Receive A Bigger Dividend Than Last Year

Shimojima Co., Ltd. (TSE:7482) has announced that it will be increasing its dividend from last year's comparable payment on the 28th of June to ¥29.00. This will take the annual payment to 4.5% of the stock price, which is above what most companies in the industry pay.

See our latest analysis for Shimojima

Shimojima's Payment Has Solid Earnings Coverage

A big dividend yield for a few years doesn't mean much if it can't be sustained. Before making this announcement, Shimojima was easily earning enough to cover the dividend. This means that most of its earnings are being retained to grow the business.

If the trend of the last few years continues, EPS will grow by 31.4% over the next 12 months. If the dividend continues along recent trends, we estimate the payout ratio will be 30%, which is in the range that makes us comfortable with the sustainability of the dividend.

Shimojima Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of ¥22.00 in 2014 to the most recent total annual payment of ¥58.00. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. So, dividends have been growing pretty quickly, and even more impressively, they haven't experienced any notable falls during this period.

The Dividend Looks Likely To Grow

Some investors will be chomping at the bit to buy some of the company's stock based on its dividend history. We are encouraged to see that Shimojima has grown earnings per share at 31% per year over the past five years. A low payout ratio gives the company a lot of flexibility, and growing earnings also make it very easy for it to grow the dividend.

We Really Like Shimojima's Dividend

Overall, a dividend increase is always good, and we think that Shimojima is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. You can also discover whether shareholders are aligned with insider interests by checking our visualisation of insider shareholdings and trades in Shimojima stock. Is Shimojima not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.